The Best Small Business Accounting Tips
Keeping books for a small business is not something most owners look forward to. And yet, without sound and responsible accounting practices, no company can expect to survive for long.
Only those that are able to learn how to maintain books of accounts for small businesses can allow themselves to focus on the fun parts like promoting your business, designing your brand, and making sales.
But what’s the most critical bookkeeping advice for small business you should know?
Let’s break down the top accounting tips below.
Small Business Accounting Tips
If you want to avoid costly headaches in the future, one of the most important small business accounting tips you should consider is keeping all of your tax records in a single location that’s easy to access.
What’s more, you should make sure that your records are conveniently organized in chronological order and contain all of the relevant documents and data because otherwise, you might find identifying the piece of information impossible after months or even years have passed.
The good news is that there are plenty of software solutions that are designed for this specific purpose. With the right software, you can track cash flow, sort invoices, make calculations, and file relevant documents with a click of a button.
For instance, many popular solutions allow instantly adding and sorting receipts by quickly taking a picture, which saves a ton of time and can be very useful when figuring out how to do business accounts.
Charge Sales Tax
The vast majority of states in the U.S. have some form of sales tax that is charged for every retail purchase that is made.
That means that if you qualify to have sales tax nexus status in your state and if you sell to customers within it, you will need to collect sales tax on top of the price of your products.
But what is the sales tax nexus? Basically, it’s a set of rules that determine whether or not you are supposed to collect sales tax in a state. Some of the qualifying factors include having a business location or warehousing in the state, or even where you make the majority of your sales.
Whatever might be the case, if your business has to pay sales tax, it makes much more sense to collect it immediately and not allow your clients to delay the payment. You should stay firm on your clients and follow up with them until they pay their balances in full and on time, as collecting money on time is a key part of how to keep books for your small business.
Have a Separate Business Banking Account
If you’re operating a small business, you might be considering getting by with your personal bank account. However, when trying to learn how to prepare accounts for small businesses, this approach would add a lot of easily avoidable complications.
For one thing, when you have a business bank account, you can keep your personal and business activity separate, and easily find and sort business records in any way that you need, which will make figuring out how to manage business accounts much easier.
Another reason why this is one of the most important small business accounting tips is the fact that when you have a business checking account, you can accept card payments. This is crucial in a world where many people only use their cards to make purchases.
Finally, having a business bank account will position you as more professional when you are looking to get a loan or financing for your business, as that will make it easier to check your business performance and financial records and will show that you are serious and run a tight ship.
Create Profit and Loss Statements
As a small business owner, you already have a lot on your plate, so adding the task of creating profit and loss statements to your to-do list might not be the most appealing prospect.
However, there’s a reason P&L statements are so popular among businesses learning how to organize small business accounting.
They help improve your bottom line by providing more info about where and how the money is flowing, increase your chances of getting a loan by making your business more transparent to lenders, and come very handy when tax time comes around and you have all of that information on hand.
But how can you start creating P&L statements regularly?
Well, first off, you will need to set aside time at regular intervals, preferably at least once a quarter. Consider that any extra time you need to allocate now will come back to you later when you can do your taxes much faster.
You should also develop a reliable way to invoice your clients and figure out how to store those documents in a way that will be easy to locate later.
To get started, choose a timeframe you want to work with, calculate your revenue and expenses, determine the gross profit, and analyze the results, identifying insights that could help you improve operations in the future.
In this article, we went through some of the most important small business accounting tips that will help you not only be better prepared for the next tax day but will also help you get financing with much better terms. If you want to learn more about the available financing options, L3 Funding can help—we specialize in providing merchant funding to small businesses across the country. Call us at (877) 9-FUNDING or fill out an application form to get started.